Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> OMI MANAGEMENT LTD AGAINST BELLHILL LTD [2021] ScotCS CSOH_47 (05 May 2021)
URL: http://www.bailii.org/scot/cases/ScotCS/2021/2021_CSOH_47.html
Cite as: [2021] CSOH 47, [2021] ScotCS CSOH_47, 2021 GWD 16-233

[New search] [Printable PDF version] [Help]

OUTER HOUSE, COURT OF SESSION

[2021] CSOH 47

CA75/17

OPINION OF LORD ERICHT

In the cause

OMI MANAGEMENT LIMITED

Pursuer

against

BELLHILL LIMITED

Defender

Pursuer: Sandison QC, O'Brien QC; Dentons UK and Middle East LLP

Defender: Dean of Faculty, Wilson; BTO Solicitors LLP

5 May 2021

Introduction

[1]

This is one of four related cases arising out of the business relationship between, on

the one hand, Mr Rajinder Bains and his associated companies OMI Facilities Limited

("OMI Facilities") and OMI Management Limited ("OMI Management"), and on the other

hand Mr Sohan Singh and his associated company Bellhill Limited ("Bellhill"). The cases

relate to the Lorne Hotel in Sauchiehall Street, Glasgow (the "Hotel").

[2]

In this action and OMI Facilities Limited v Bellhill Limited ([2021] CSOH 46) Mr Bains'

associated companies seek payment of sums for services said to have been provided to

Mr Singh's associated company Bellhill in respect of the running of the Hotel.

[3]

In OMI Facilities Limited v Singh (2021 CSOH 45) OMI Facilities seeks payment of

sums said to be outstanding under a Personal Bond dated 9 October 2010 (the "Personal

Bond"). In Bellhill Limited v Rajinder Bains ([2021] CSOH 48 Bellhill seeks payment of sums

said to have been misappropriated by Mr Bains during the time when Mr Bains was running

the Hotel.

[4]

The opinions in all four cases should be read together in order to give a complete

view of my findings.

[5]

This case and OMI Facilities Limited v Bellhill Limited both relate to services said to be

provided by Mr Bains' companies to Bellhill. OMI Facilities trades as a supplier of cleaning

and other services to hotels. OMI Management trades as a supplier of management and

other services to hotels. There is considerable crossover between this action and OMI

Facilities Limited v Bellhill Limited. Similar issues apply to both, the difference being whether

the service in question was supplied by OMI Facilities or OMI Management. Where there

are common issues, I deal with them in detail in the opinion in OMI Facilities Limited v

Bellhill Limited, and then apply my decision in this opinion.

First conclusion: payments in 2013-14 by OMI Facilities to allow Hotel staff wages to be

paid and to member of Hotel staff, totalling £303,450.49

[6]

In terms of this conclusion, OMI Facilities seeks to recover sums paid by

OMI Facilities on behalf of Bellhill to Towncrest and Kelvingrove in 2013 and 2014 to pay the

wages of staff nominally employed by Towncrest or Kelvingrove who were working in the

Hotel for Bellhill. It also seeks to recover a wages payment made to a member of staff

Frank Queen in 2013. The legal basis on which OMI Management seeks to recover these

sums is the same as that on which OMI Facilities sought to recover sums under

conclusions four and five in the OMI Facilities v Bellhill action. I have found in favour of

OMI Facilities and it follows that I should find in favour of OMI Management also.

Accordingly I find that, subject to adjustment as follows, the payments by OMI Management

to Towncrest, Kelvingrove and Mr Queen were made by OMI Management on behalf of

Bellhill.

[7]

OMI Facilities' expert Mr Cuerden identified the sums by reference to the payment

narrative included in OMI Facilities bank statement. He adjusted the sum originally sought

to limit it to the amounts verified by him. The sum of £303,450.49 now sought under this

conclusion is the amount as adjusted by him.

[8]

That sum of £303,450.49 requires to be reduced by £21,000 in respect of invoice 71, as

counsel for OMI Management accepted that it should be removed to avoid double counting.

[9]

Senior counsel for Bellhill criticised some of the supporting documentation in respect

of some of the figures claimed. However, in my view no further adjustments require to be

made. I accept Mr Cuerden's opinion, based on his examination of all relevant

documentation that these figures fall to be included. I find that, subject to the discussion of

the general defence below, Bellhill is liable to pay the principal sum of £282,450.49 and

interest under this first conclusion. Consistently with conclusions 4 and 5 in OMI Facilities v

Bellhill, interest will be at the judicial rate from the date of citation.

Second conclusion: supply of staff by OMI Management to Bellhill in 2014-2015 in the

amount of £1,413,910.70

[10]

The claim under this heading relates to the cost of employees who were engaged by

OMI Management but who carried out work in the Hotel for Bellhill's benefit, following a

TUPE transfer in January 2014. Under the TUPE transfer, staff working at the Hotel who

had been nominally employed by Towncrest or Kelvingrove were transferred to OMI

Management. Following the transfer, OMI Management invoiced Bellhill for the staff costs.

There was a dispute between the parties as to the basis of the transfer. There was also a

dispute as to quantification of the wages paid.

[11]

Mr Bains gave evidence that in around January 2014, Butta Ram, one of the chefs

spoke to Frank Queen about concerns and Frank subsequently spoke to Mr Bains. At that

point, Mr Ram was notionally employed by Towncrest Limited and worked as a chef at the

Hotel. He was upset as he was having difficulty getting a mortgage as PAYE had not been

paid. To facilitate getting the Hotel back on an even keel, Mr Bains arranged to transfer the

staff who worked at the Hotel out of Towncrest and Kelvingrove and into OMI

Management. That was done with Mr Singh's approval, having been discussed at a meeting

between Mr Singh and Mr Bains in January 2014. Mr Singh asked Mr Bains to set up a

further management company notionally to employ the staff but Mr Bains refused to do so

in order to ensure that things were done properly. The transfer was done in April 2014 with

the agreement of Mr Singh. Once the staff were transferred to OMI Management, OMI

Management invoiced Bellhill at the end of each month for services rendered. When the

Hotel was back on an even keel the staff were transferred back to Bellhill in January 2016,

from when Bellhill met the costs of the wage bill.

[12]

Mr Singh's evidence was that the OMI companies had made unlawful deductions

from the wages of their staff members. The discussion between Mr Bains and Mr Singh

referred to in Mr Bains' evidence did not take place. Mr Bains transferred the staff to the

OMI companies without the knowledge or input of Mr Singh. The real reason why Mr Bains

moved his staff onto the Bellhill payroll was due to the fact that his companies were being

investigated by HMRC and Mr Bains was beginning to panic and thought he would have to

dissolve those entities in order to escape the liability.

[13]

I accept the evidence of Mr Bains. It is consistent with the other evidence about the

poor financial position of Bellhill, the financial support given by Mr Bains to Bellhill through

the OMI companies, the payment by OMI companies of the Hotel wage bill on behalf of

Bellhill prior to the TUPE transfer, and Mr Singh's use of sham companies. Accordingly I

find that the arrangement whereby the Hotel staff were transferred to OMI Management

and OMI Management charged Bellhill for the supply of Hotel staff was agreed by

Mr Singh.

[14]

The quantification of the sum sought under this conclusion was undertaken by

Mr Cuerden. Mr Cuerden reconciled the total sum recharged to Bellhill to the gross payroll

cost recorded in the payroll records of OMI Management. He excluded from the sum

sought an invoice which was in his opinion raised in error.

[15]

Senior Counsel for Bellhill challenged the quantification on the basis of the invoice

numbering sequence and of there being several sets of invoices. In my opinion this

challenge does not succeed as Mr Cuerden's analysis is based on the underlying payroll

records rather than solely on the invoices raised. Senior counsel also challenged the

inclusion of VAT in the sum sought under this conclusion on the basis that since the invoices

were for recharges of staff costs, no VAT would be chargeable. This proposition was not

developed and no authority was given for it. On the basis of the submission made to me it is

not apparent to me that there is any good reason why supply of staff does not, as a matter of

law, constitute a chargeable supply. Mr Cuerden, a very experienced accountant, took the

view that VAT was chargeable and included it as part of the amount which in his view

properly fell under this conclusion. In my opinion this challenge also fails.

[16]

I find that, subject to the discussion of the general defence below, Bellhill is

liable to pay the principal, and interest in terms of the Late Payment of Commercial

Debts (Interest) Act 1998, sought under this second conclusion.

Conclusion three: goods and services supplied to the Hotel by third parties and paid for

by OMI Management mainly in the period 2013-2015 in the sum of £35,199.94

[17]

This conclusion relates to sums expended by OMI Management between July 2013

and April 2015 in purchasing various goods and services for the benefit of Bellhill in

operating the Hotel. The invoices are listed in two appendices to the summons. The first

appendix lists items identified by Mr Bains and the second lists further items identified by

Mr Cuerden. The underlying documentation in respect of both appendices was reviewed by

the pursuer's expert Mr Cuerden, who identified and stripped out any clerical mistakes, so

that the only sums set out in the appendices and sought under this conclusion were the

sums that he had verified in respect of OMI Management.

[18]

The two sums sought under this conclusion fall to be dealt with in the same way as I

have dealt with conclusion three in OMI Facilities v Bellhill. The only difference between the

sums sought under this conclusion and the sums sought in conclusion three in OMI

Facilities v Bellhill is that here the advances were made by OMI Management rather than

OMI Facilities. For the reasons set out in OMI Facilities v Bellhill, I find that Bellhill impliedly

contracted with OMI Management that Bellhill would reimburse OMI Management in

respect of the items set out in each of the appendices if the sale of the shares to Mr Bains did

not go ahead.

[19]

The sums sought to be recovered under this heading relate to expenditure by OMI

Facilities for the purposes of the business of Bellhill at the Hotel mainly in the period from

2013 to 2015. The invoices for the items supplied, or bank statements showing the

payments, were produced and were listed in a schedule to the summons, totalling the sum

concluded for. Mr Robb had not been instructed to form a view on the sums sought in this

action.

[20]

I find that, subject to the discussion of the general defences below, Bellhill is liable to

pay the principal and interest sought under this third conclusion.

Conclusion four: sums advanced to Bellhill by OMI Management in June and July 2013

totalling £74,875

[21]

This conclusion relates to two sums which were advanced by OMI Management to

Bellhill, namely a sum of £20,875 in April 2013 and a sum of £54,875 in June 2013.

[22]

There was no dispute on record that these sums had been paid. The issue between

the parties was the nature of the payment. OMI Management averred that Bellhill impliedly

contracted with OMI Management that it would repay these loans if the anticipated share

transfer did not take place. Bellhill averred that the payments had been made towards the

deposit for the grant of the option.

[23]

Mr Bains gave evidence that in April 2013, OMI Management lent Bellhill a sum

of £20,875 that Bellhill owed to Bank of India. The Hotel was being managed by Mr Sharif at

that point and was in a terrible state. The money was needed urgently to relieve the

significant pressure the Bank of India was putting on Bellhill to clear its arrears with the

bank. In June or July 2013, OMI Management had to lend a further £54,000 to clear the debt

with Bank of India.

[24]

Mr Singh's evidence was that although Bellhill had been in arrears with the Bank of

India from time to time, these had been repaid promptly from Bellhill's cash flow. Bank of

India had never threatened to repossess the Hotel. There was an entry on Bellhill's current

account from OMI Management of £20,000, but Mr Singh agreed to set this off as part of the

non-returnable deposit agreed in respect of the agreement to transfer the shares.

[25]

In my opinion, the bank statements for Bellhill's current deposit account with the

Bank of India support Mr Bains' evidence. They show that around June and July 2013

repayments of the loan from Bank of India were not paid regularly nor in fixed amounts.

Instead, whenever Bellhill was a few thousand pounds in credit in the current deposit

account almost the entire sum at credit was transferred to Bellhill's Bank of India loan

account. They show that on the same day that the £20,875 and £54,000 from OMI

Management were paid into the current deposit account they were transferred out of the

current deposit account to the loan account.

[26]

The two sums sought under this conclusion fall to be dealt with in the same way as I

have dealt with the sum sought under conclusion 6 in OMI Facilities v Bellhill. All three

sums were advanced in June or July 2013, at a time when Mr Bains had just taken over the

running of the Hotel and Bellhill and the Hotel were in a poor financial state and, in order to

continue in business, needed to be financially supported by Mr Bains through provision of

working capital, repayment of Bank of India loans and payment of suppliers. As in OMI

Facilities v Bellhill, I reject Bellhill's position that the payment was part of a non-returnable

deposit under the option because I have found in OMI Facilities v Singh that there was no

agreement whereby such a non-returnable deposit was to be paid.

[27]

I find that, subject to the discussion of the general defence below, Bellhill is liable to

pay the principal and interest sought under this fourth conclusion.

General defence: Abuse of process

[28]

The third plea in law for Bellhill was that the action being fundamentally dishonest

and an abuse of process, the claim should be dismissed. The arguments in relation to that

plea were the same as those for the identical plea in OMI Facilities Limited v Bellhill. I reject

the defence of abuse of process in this case for the same reasons as I did so in OMI Facilities v

Bellhill. Accordingly I shall repel the third plea in law in this action.

Order

[29]

I shall uphold the second plea in law for OMI Management, and repel the third,

fourth and sixth pleas in law for Bellhill and uphold Bellhill's seventh plea in law in part. I

shall grant decree in terms of first conclusion in the principal amount of £282,450.49 plus

interest as concluded for. I shall grant decree in terms of the second, third and fourth

conclusions. I reserve all questions of expenses in the meantime.